Industry Roundtable: The Wide-Format Forecast
Taking stock of 2010, and preparing your business for 2011 and beyond.
In 1925, there was no tornado forecasting. In fact, the very use of the word “tornado” was strongly discouraged and often prohibited in any weather reporting because of a fear that predicting tornadoes would cause panic.
There was no warning then in the spring of that year when what is now dubbed “the Tri-State Tornado” touched down near Ellington, Missouri. But the tornado did not
stop there. In three-and-a-half hours, it tracked more than 200 miles, sweeping across Missouri, southern Illinois, and southwestern Indiana. In the end, nearly 700 people were killed and more than 2000 were injured; four communities were wiped from the face of the Earth. It remains the deadliest storm in US history.
Today, we thankfully have become much more profi cient when it comes to forecasting for tornadoes and other violent storms: The US Weather Service’s Storm Prediction Center and National Severe Storms Laboratory have set up tornado-warning systems in every state, and the average lead time for a tornado warning is up to 11 minutes (they are striving to increase that number to 20).
Each year, we do our own “economic storm” forecasting by gathering together some of the top consultants in the market to comment on current industry trends and forecast where the market might be in the next 12 months. We certainly like to hope that there is no tornado in our market’s path or severe storm on the horizon for any print provider. But it’s always better to be prepared than to be blindsided.
Our “forecasters” this year include: Marco Boer, vice president, I.T. Strategies; Frazer Chesterman, managing director, FESPA; Tim Greene, director, visual communication technologies consulting service, InfoTrends; Dan Marx, vice president, markets & technologies, SGIA; and Peter Mayhew, director, Lyra Research Europe.
Question: The continued sluggish economy has been challenging for most print providers. Yet we’ve seen some print shops – especially the very large ones as well as the smallest ones – find interesting ways to survive and even prosper. But when do everyone’s fortunes turn around?
Dan Marx, SGIA: There has been a great deal of consolidation in the industry, and many of the mid-sized businesses have taken it on the chin. Large providers seem to weather the storm quite well, and small shops often use their diversity to keep the fires burning, even in difficult times. While there’s no easy answer to know when the economic uncertainty will be over, one thing is certain: Companies should do what they can to make it through and prepare to hit the ground running when the economic flood gates open.
Tim Greene, InfoTrends: Like most, I think there’s a cautious optimism that
exists in many corners of “the market” right now. I’m somewhat of a believer in the “new normal” – which, to me, means that in this market there is a reset of what can and should be expected in terms of the return of profitability. Even higher levels of business don’t equal the return to equal levels of profitability because capacity in the market exceeds overall demand. In one of our recent surveys, we asked people in the market – printers, dealers, manufacturers – about this and more than half of the respondents reported that they think the recession is over, but generally they do not expect a recovery of business levels until the end of 2010 or into 2011.
Peter Mayhew, Lyra: There are many economists, analysts, and commentators making a wide variety of predictions about the recovery of major economies from the recession. What is clear is that companies that are proactive in creating and developing business opportunities will see results faster than those who simply expect business and, consequently, a recovery, to arrive without any signifi cant effort on their part.
Frazer Chesterman, FESPA: In our third Economy Survey, we found that
two thirds of the respondents have innovated processes or products to address the downturn. Their innovation has taken the form of changing processes such as sales and marketing strategies – which a third have done – and entering new business niches – which more than half have done. We also discovered that 57 percent of respondents think that the recession is now over, 10 percent believe the market has recovered, and 28 percent believe that recovery will come later this year. Only five percent of those we spoke to thought that the recession would continue beyond 2011. And in our recent World Wide Survey in partnership with InfoTrends, we established that two thirds of the respondents were looking for new market opportunities to try to return their businesses to growth. We are broadly optimistic that the fortunes of the printing industry have reached a turning point.
Marco Boer, I.T. Strategies: Ninety percent of challenges stem from the economic recession. The other 10 percent of challenges stem from requirements – both competitive and regulatory – to be more environmentally friendly. There is a habit change required in the practices the industry uses, from reducing substrate waste to proper recycling. If the industry doesn’t take a lead in becoming more efficient in the entire life-cycle chain of wide-format print, it may someday wake up to find itself marginalized and supplanted by other advertising/communication means.
In 12 months, the wide-format world will be at a level of status quo20 where we’ll have all adjusted to the “new normal” state of the market. The industry will be full of renewed optimism and innovation will reign.
Question: Are there specific strategies that successful shops are taking to better their bottom lines vs. their less-successful peers?
Mayhew: The more successful busi¬nesses are taking full advantage of their capital equipment and resources. Previously, many niche products and services were overlooked – now, they’re seen as high-value, high-margin op¬portunities, and marketed accordingly.
Boer: Those shops that have a defined process, and aren’t saddled with either burdensome debt or reliant on other sources of income (e.g., unpredictable rent from tenants in their building), will likely do fine. Continually trying to improve the details of process flow, from order intake to order delivery, helps shops to improve efficiencies as well as provide owners with a true understanding of costs and profits. The days of running a print shop on the basis of artisan skill alone are probably over. Understanding your business in terms of financial performance allows you to plan ahead for new technology innovation, application offerings, and so on.
Chesterman: A huge 68 percent of respondents in our World Wide Survey told us that they had looked at new market opportunities or developed innovative processes or products to tackle the impact of the economic downturn. Nearly a quarter of respondents see the future success of wide format being the ability to deliver marketing solutions to their customers. So it would seem that thinking outside of the box, and delivering value-added print to clients, has been the most ef¬fective way to raise that bottom line.
Greene: We’re seeing companies enter new markets and expand the portfolio of services they offer as a way to try to draw in new customers and grow their business with existing customers. This may sound easy, but the reality is it’s a lot of work. In the survey I mentioned previously, we found that 50 percent of respondents have added services to their portfolio to try to enhance business. I think the length of the recession has driven some of this, too; companies can typically do some cost cutting very quickly so those actions have been taken through 2009. But entering new markets or expanding their services to try to drive new lines of business takes longer, and I think people generally recognize this, which is why so many people believe the end of 2010 and 2011 will see somewhat of a recovery.
Marx: Our recent surveys have shown that imaging companies are making a wide variety of efforts in order to “gain the upper hand” on their competitors. More than 58 percent of companies responding to our recent SGIA Market Trends Survey Report said they added new product lines, and more than 45 percent added either additional imaging capacity or finishing capacity. It’s apparent that numerous companies are working to be “one-stop shops” for their customers.
Question: What have been some of the most intriguing technologies and products introduced to the marketplace in the past 12 months?
Chesterman: UV-curable inkjet is without a doubt one of the growth areas, and we’ve seen a definite increase in interest for technologies such as eco-solvent and latex inkjet as opposed to more established solutions such as aqueous and solvent inkjet. There has also been an increase in interest in workflow software among wide-format print providers; businesses are looking to maximize productivity and improve profit margins and workflow software is one way to achieve this.
Greene: Wide format is a dynamic market, so there are a bunch of tech¬nologies that are very intriguing to me right now. As a background, when we ask people why they plan to buy a new printer these days, the primary answer is about speed. I don’t think they mean running speed, although that is a part of it. I think they mean productivity, or the ability to turn jobs around faster. There are a few different ways this can be achieved. One of them is all the automated media-handling systems that we’ve seen from the leading suppliers at the high end of the market. The kitting/fulfillment software that was unveiled at SGIA from Fujifilm, for instance, is another good example of this kind of innovation. In terms of opening up new applications, I think the new ink formulations from Roland and Mimaki that utilize a metallic pigment are very interesting, and I have seen another new formulation from Inca Digital that appears to be a great fit for the cosmetics industry. I think that is the wave of the future: specific products for specific markets.
Mayhew: Probably the most impres¬sive recent technological introduction is HP’s fourth ink type, which utilizes latex technology. Yes, there are still challenges for the technology to overcome, but it’s an ink that is here to stay. Also, at FESPA, we saw more companies introduce products with LED UV-based curing – another technology with more hurdles to overcome, but with clear long-term potential.
Boer: Most of the innovations will stem from improvements in ink/sub¬strate interaction. Companies making their own inks, including EFI/Vutek and Agfa, are making strong advances on UV-curable ink jet inks, and HP has introduced its latex inks, which have been well received in the market. We expect others will follow with similar innovations. Improvements in print quality, while real, will have diminishing returns from an investment standpoint because the quality is already very good.
Other innovations will relate mainly to application use, enabled by better ink/substrate innovations and higher-end technology features that trickle down. Stretchable inks will be¬come more common and allow for the printing of products that are formed into three-dimensional shapes after they’re printed. Some of the higher-end product features such as automatic loading/unloading of substrates will wind their way down to less-expensive products, speeding productivity but also allowing more difficult substrates such as textiles to be fed more reliably through the printer.
Marx: In the last two years, the wide-format digital imaging markets have reached a bit of a technological plateau. During the early and mid 2000s, it seemed as though new and breathtaking technological innovations were happening monthly (if not sooner). Today, though improvements in speed and quality are constantly underway, huge developments in printing technology are incremental. Much of the innovation today, and much of what is allowing imagers to access so many new markets, is the ongoing development in both media and finishing technologies. That’s where today’s action is.
Question: On the OEM M&A side of things, we’ve seen deals finalized between Canon and Océ, and Agfa and Gandinnovations (as well as Pitman). How will these M&A deals – and any others I might be forgetting to mention – affect the market?
Greene: Great question. There are a lot of pitfalls when it comes to these deals. It is so important that the companies involved get together and actually continue to do what each does well and not be in too much of a hurry to integrate and look for cost efficiencies. For Océ and Canon, the product lines fit together very well, it will be very interesting to see where they go with future products and the technologies that both companies bring to the table. One thing that’s clear to me is that, as a result of its recent activities as well as its own product and market development, Agfa has really stepped up its game in terms of competing across the segments of the UV-curable inkjet market. They are in just about every segment of that market now, with a big sales force to push it and very strong fulfillment capabilities to back it up.
Chesterman: The graphic-arts community is constantly evolving and the mergers between companies such as the ones you have named are indicative of this. Take Canon and Océ for instance: Océ traditionally manufactures wide-format systems, and Canon, production presses, although they do have a wide-format division as well. With mergers like this, we are experiencing a blurring of lines. Eventually distinguishing businesses by their output, e.g., “wide format,” or “narrow-format,” may become increasingly difficult.
Boer: The M&A deals will likely bring wider accessibility and product improvements in terms of reliability, ease-of-use – things that benefit from big corporation process. What it may not bring is faster innovation. Typically, acquisitions are not accretive, so revenues go down while debt payments to acquire the business must be paid and integration into the new entity occurs. But in the end, more predictable and reliable products will come to market. The fear, of course, is that with fewer competitors, pricing might go up. Given that wide-format graphics printing is a fairly mature print market with many potential, emerging non-US competitors like Grapo, SwissQ, Sun LLC, and others, it’s unlikely the newly merged companies will be able to pass on price increases.
Question: UV continues to make in¬roads into the rollfed side of the market. Approximately one-sixth of all rollfed models in our latest rollfed printer survey indicated UV technology – a nice slice of that pie. Will that group get even larger in 2011?
Marx: Yes. UV solutions will continue to expand, even among roll-to-roll units, particularly in the next couple of years as UV LED-curing systems become both more efficient and more common. While UV isn’t the solution for every application, its instant curing means you can move the print straight into finishing without having to wait for solvent to evaporate. Obviously, the environmental favorability of UV over solvent is also a strong driver for adoption of UV in roll-to-roll systems.
Chesterman: Almost a quarter of respondents to our World Wide Survey said that, thinking ahead to their next machine, they were most likely to purchase a UV-curable inkjet device. Again, it’s a question of keeping up with, or staying ahead of your competitor. UV inkjet offers advantages over aqueous: It dries instantly and leaves the graphic completely cured. In the world of outdoor advertising, this is essential to ensuring the longevity of your product.
Greene: There’s no question about it in my mind. There is a tremendous amount of work being done on the ink side of the market that will enable UV-curable inkjet printers to get a bigger piece of the action in that space.
Boer: It’s easy to sometimes confuse the volume of product introductions with market success. In the digital label printer market, for instance, there have been nearly 20 manufacturers entering with product during the last two years. Effectively, however, only three of those are shipping product. While this is not the case with UV-rollfed products, where announced products do become commercialized once announced, they still account for a growing but small portion of wide format graphics printers sold.
Question: We’ve been seeing a great interest in 2d barcode (e.g., QR codes) technology from the print provider viewpoint. Are you seeing movement in this technology as well?
Chesterman: Yes, QR codes are a great example of how print can be integrated with digital media to provide creative solutions for the digital-brand owners and drive their businesses forward. QR codes, augmented reality, etc. – these are all things that illustrate the many possibilities which may well come to define printers in the future. Digital media is increasingly prevalent throughout the industry, and print service providers need to be open-minded and consider embracing this technology now, while it’s still in its infancy. Applications such as QR codes are a way of encouraging dialogue between the print provider and the customer.
Marx: I’ve been interested in QR codes for some time, and they are becom¬ing more and more pervasive here in the US. I think QR codes offer an excellent opportunity for imagers and designers who can incorporate them into ad campaigns, and for ad agencies and businesses interested in using their static signage to drive customers to the Internet through their mobile devices. Today’s enterprising imaging companies should learn how these codes can be optimized and offer that knowledge as a “value add” to clients.
Boer: Don’t forget that QR codes have been in use in Japan for nearly a decade. While, like in the US, they found great early excitement among print service providers as a tool to make print more interactive, it requires additional steps from the user to learn more. The interest in Japan seems to be waning as other innovations in communication come along. Standardization of format is a key issue so that users do not have to download different readers to be able to read the code. Any print service provider would be well advised to proceed cautiously with making investments in the ability to print QR codes – in other words, buy off-the-shelf software to help, don’t pay a premium for custom software, and make any investment decision on the basis of fast ROI – 18 months or less.
Question: Like most companies, print providers are dipping their toes into the social-network media (e.g., Twitter, Facebook, YouTube, LinkedIn, etc.) pool with varying results. Here at The Big Picture, we’ve seen vehicle-graphics providers es¬pecially put social networking media to good use. What’s your take on how successful print providers will be in benefiting from social-network media?
Marx: The real value of using social-media tools is twofold. First, when used carefully as part of a concerted Internet strategy, social-media tools can strongly improve a company’s ranking in online search results, because the search engines consider social-media involvement during the search process. Second, when used thoughtfully, social-media tools like LinkedIn – and increasingly, Facebook – can be essential tools for online networking and contact building. Social media takes work, however; you only get out of it what you’re willing to put in.
Chesterman: It’s the USA where social media has really taken off, and it appears that the rest of the world has been slower to reap the benefits. Those print service providers that have been using social media to their full advantage are benefiting as they learn more about their customers through open dialogue. This has to be the immediate goal for any company dipping their toes into the social-media landscape. Tools like Twitter, Facebook, and LinkedIn are about building relationships that can be mutually beneficial.
Greene: I think there’s a great opportunity for print providers to use these tools to market their services more broadly and show their “friends” and “followers” some of the innovative and creative projects they are producing, while at the same time informing them about the effectiveness of cross-media. In a recent survey, we found that 37 percent of wide-format printing companies are using social media in one form or another. It’s not just Twitter or Facebook, although those are two of the biggest; it’s also Linked-In, which can be enormously helpful for networking, finding answers to technical questions through “groups,” and even finding new employees.
Question: Let’s talk about applications. What are you seeing as the “hottest” applications for wide-format print in the past 12 months? And for 2011?
Boer: We project incremental business will come from soft signage and decorative applications. Soft signage, still a specialty, will grow at high percentage rates from its small volumes today because it’s a high-value-add product that offers incremental opportunities to sell a wide-format sign/banner/flag. There’s a possibility that soft signage, if marketed correctly, will become as common as ordering a digital photobook for special occasions or events.
Decorative applications require a skill set beyond wide-format print; it requires the ability to convert the print into a finished product. It could be as simple as putting grommets on a printed vinyl sheet to make a custom shower curtain, or printing on fabric to create home furnishings. Print service providers who are able to develop new application/finishing skills may find their business transitioning well beyond just being a simple print service provider.
Mayhew: We’ve noted a significant focus on P-O-S/P-O-P over the last 12 months, arguably driven by the need to encourage consumers to spend (and spend more) when faced with a product-purchase decision. We expect to see this trend continue and become more personal, localized, and interactive.
Chesterman: Again referring back to our World Wide Survey, most of its respondents cited banners, posters, signs, and P-O-S/P-O-P as leading applications, and this has proven to be a market area which remained stable despite the economic down¬turn. We’ve also noted an increased demand for billboards, photographic applications, decals, and presentation graphics. Within the market, growth is evident in emerging application ar¬eas such as textile, interiors, flooring, and fine art.
Greene: Our research tells us that P-O-P remains one of the hottest markets, but from my own observation I think the P-O-P materials that are “hot” are things like floor graphics and hanging banners.
Marx: According to this year’s SGIA Product Specialties Survey, banners, window displays, decals, indoor wall graphics, and presentation graphics are among the products the most printers are printing. The strongest markets for growth in the year ahead were reported as environmental graphics, indoor wall displays, building wraps, and point of sale. The product seen as declining the most: billboards.
Question: And what about profit centers beyond print work? Are any of these taking off in the downturn: Install work? Scanning? Design? Kitting/fulfillment? Display? Other?
Marx: Our recent Product Specialties Survey asked imagers about the post-production services they offer their customers. According to the survey, almost all provide lamination, so that really cannot be seen as a unique profit center. Beyond that, sewing and seaming, routing, and grommeting have grown significantly over the past three years. Warehousing is also reported as a significant post-production service.
Mayhew: We have witnessed an increased interest in providing ar¬chiving, retrieval, and other document management services beyond print¬ing. It’s being seen as another way of developing an ever-closer relationship with clients.
Question: Printing on fabrics seems to have become even more popular in 2010. Are you seeing this as well? If so, why do you think this is?
Marx: Fabric graphics pull a higher price point, and manufacturers continue to make innovative new products that stretch the boundaries of what digitally printed fabrics can be used for. The possibilities have grown. I think many imaging companies have entered some of the fabric graphics markets as a way to differentiate themselves from the highly saturated vinyl-banner market.
Greene: Yes, it has become more popular. There is definitely some inter-relationship between some of these market developments; the market decline caused print providers to look at new markets and additional applications, including higher-margin applications like textiles for soft signage. At the same time, fabrics appeal to the “green” element of the market with easier recycling and lower shipping costs.
Boer: Soft signage and related decorative applications are higher value products for two reasons: The output is printed on a more expensive substrate, and the substrate provides something paper or vinyl cannot: total flexible movement. It flutters in the air when hung, immediately drawing attention. When converted into a curtain, pillow, etc., it adds value well beyond the mere print. Lastly, it gives print service providers something new and exciting to sell to their customers, which may be the most important of all.
Mayhew: We’ve observed a growing interest in textile printing for some time and expect the trend to continue. There are a number of drivers including differentiation, perceived innovation and quality, and the apparent environmental benefits. Access to fabric and textile printing is also on the rise, with the installed base of capable printers growing steadily.
Chesterman: Digital print is perfect for the short runs and fast turnarounds that underpin the supply chains of today. The demand for increasingly fast turnaround times, especially in markets such as point-of-sale advertising, have made digital print essential for cutting the manufacturers’ time-to-market. At the same time, the fastest-growing sector for digital textiles, flags, and banners, increasingly offer marketers substantial practical advantages. Not only are they aestheti¬cally pleasing, but they are easier and cheaper to transport. And because they can often be recycled, fabrics are also proving environmentally friendly at a time when “green” printing is increasing in popularity.
Question: Which is a good segue to the topic of green/sustainable printing – is that still a strong revenue producer among print providers?
Mayhew: Yes and no. Awareness of environmentally improved products has increased dramatically. However, in these budget-constrained times, financial considerations are often displacing the best of intentions.
Marx: While the current economic uncertainty has slowed somewhat the drive for sustainability – or at least efforts that point in that direction – I think the sustainability movement has changed our industry on some level. Printers, print buyers, and end customers are now much more aware that there are environmentally favorable options for printed graphics, and our suppliers and manufacturers have made available a wide variety of products that improve upon the status quo. The move toward sustainability can and should be a business decision, because it makes strong business sense.
Greene: There’s no doubt that the focus has shifted somewhat off of green/sustainable printing in some areas because the economy has had so many companies simply struggling to survive. But still it is important and some companies have used it successfully to differentiate themselves and grow their business.
Boer: Sustainability is one of the industry’s greatest challenges, in part because so much revolves around economic benefits and challenges. Many consider print to not be a green product, and for short-turn advertising/communication, print is not green, given the enormous amount of energy and resources used to create something that lasts just a few days, at best. Electronic display signage is far more cost effective, and, frankly, consumers are becoming “instant informationavours” – a self-descriptive word we claim invention credit for, by the way – and won’t react to printed signs the way some still do today.
But for longer-term signage, print is likely to be far more cost effective, because no energy is needed to display the sign. As an industry, we need to help focus the message where wide-format print is sustainable, and what is being done to minimize the impact of the raw materials that are used.
Chesterman: At the beginning of 2009, we conducted an Economy Survey that showed that, while printers were fighting the recession, the industry’s environmental focus had become diluted. Nearly 60 percent of those we asked said that environmentally sus¬tainable production was currently less important as a result of the economic downturn. At the same time, though, a fifth of respondents told us they were using sustainability as a point of competitive differentiation, and they believed there were opportunities to innovate in this area. This seems to be an idea an increasing number of print service providers have seized on as the economy begins to recover, as we can see from the rising demand for eco-solvent and latex technologies. It would seem that companies are taking the environment seriously now, even if their reasons are altruistic. We expect that trend to intensify as the market recovers and more buyers shift their interests away from price alone.
Question: In our recent September is¬sue we featured an article on training and education opportunities for print providers, and, this year, I was surprised that I didn’t see much of an increase in the offerings from across the marketplace. We do continue to see offerings in the vehicle-graphics end of things, but not so much in other applications. Why do you think this is?
Greene: I agree on both counts – that vehicle-graphics education is ahead of any other application and that we don’t see it nearly as much for other types of applications. The reasons are that there are large companies like 3M, Avery, Mactac, Nazdar, etc. that are very invested in the success of the vehicle-graphics market. At the same time, there’s a very distinct expertise required in the vehicle-graphics application, so the professional associations are strong as well. The other application that really seems like it should have similar professional education is fabrics printing, but so far this has not materialized.
Chesterman: In a recession, it’s natural for businesses to focus on processes and to lose sight of the future, which may explain why you didn’t see an increase. We expect this to change once the economy has recovered and businesses begin to move forward.
Marx: I think a great deal of the “falling off” we’ve seen in industry training has been due to economic uncertainty. Many facilities, after reducing labor, have been reluctant to hire new staff, instead relying on their most capable and proficient employees. The problem here is that, in order to stay on top of changes in the industry, and in order to incorporate new technologies and materials and access new markets, training is an essential ingredient for success. I believe that the increase in training for vehicle graphics is due to the fact that vehicle installs cannot be muddled through. It takes a trained, experienced, and proficient installer to do the job right.
Question: Any parting comments or observations?
Marx: Even given the current challenges of the economy, this is still an exciting time in our industry. As an industry representative, I am currently surprised by the innovative spirit, ingenuity, and outright pluck of imaging companies. They have truly taken the “ball” of digital graphics and run with it, and for that they should be applauded.
Greene: Nobody can tell when things will turn around for sure but one thing is certain: The wide-format graphics business will be increasingly competitive, so using the latest tools and technologies to both produce and market/sell your services in the most cost-effective ways is critical.
Boer: In rough waters, don’t stop rowing – you’ll capsize. Keep rowing, even if you are not moving forward. This means keep innovating, making measured investments, and cut your losses before you run out of cash. Invest in innovative new printing technologies, ones that can print on textiles, that can create decorative output. Godspeed!